Duff Company is a subsidiary of Rand Corporation and is located in Madrid, Spain, where the currency is the euro (€). Data on Duff’s inventory and purchases are as follows:
Inventory, January 1, 20X7.... €220,000
Purchases during 20X7..... 846,000
Inventory, December 31, 20X7... 180,000
The beginning inventory was acquired during the fourth quarter of 20X6, and the ending inventory was acquired during the fourth quarter of 20X7. Purchases were made evenly over the year. Exchange rates were as follows:
€ $
Fourth quarter of 20X6 .... 1 = 1.29015
January 1, 20X7 ...... 1 = 1.32030
Average during 20X7 .... 1 = 1.39655
Fourth quarter of 20X7 ...... 1 = 1.45000
December 31, 20X7 ....... 1 = 1.47280
Required
a. Show the remeasurement of cost of goods sold for 20X7, assuming that the U.S. dollar is the functional currency.
b. Show the translation of cost of goods sold for 20X7, assuming that the euro is the functional currency.